Murugappa Group to invest 2,000 crore in agriculture inputs, engineering

The group’s earnings before interest, taxes, depreciation and amortisation (EBITDA) was Rs 4,663 crore, higher by 14 per cent over that of the previous fiscal. The listed companies of the group have a market cap aggregating to $10 billion. With 80 manufacturing locations in over 18 states, it sees itself as a pan India player. “We have seen a steady and sedate growth over the last three years. 2017-18 has been a good year,” Murugappan said, noting that growth, building capability and efficiency would be the three key drivers of business to stay “current and competitive.”

The capex towards expansion, de-bottlenecking and modernising facilities across group companies were over Rs 600 crore during the year. As part of selectively putting fresh capacities, the group will look at setting up a new plant with an annual capacity of 4.50 lakh tonnes at Vizag, to cut import of phosphoric acid and enhance existing capacities of the fertiliser major Coromandel International. A sum of Rs 350 crore has been earmarked for this.

Elaborating, Sridharan Rangarajan, President and Group CFO, said the investment will be in the group’s international and domestic operations. The group is also planning to set up a gas-based power plant in silicon carbide manufacturer Volzhsky Abrasive Works (VAW), Russia. The capacity of the gas-fired power plant in Russia, which will be funded through internal accruals, is yet to be finalised, he said.

According to Murugappan, around 10 per cent of the group’s turnover is from exports and largely contributed by crop protection chemicals, ceramics, steel tubes and others. Though the group was “ambitious” about export growth in the past, it had been offset by some amount of domestic growth. “Markets were muted but we are seeing green shoots in the US and Europe. Our focus on exports is not waning at all,” he said, noting that a different approach (focusing on engineering supported by applications) had been adopted. In China, for instance, it had closed its operation but instead has a manufacturing license agreement in force there. “China is emerging as a country that is now looking at value add businesses,” he added.

Queried about the US sanctions against Russia and its impact on the group, Murugappan said some of the customers were impacted but VAW was not significantly hit.

He said the group had no plans to rename any of its-listed or unlisted companies with the word Murugappa. Each group company had a history behind it and their products have good brand equity.

To another query, Murugappan said “we will grow and invest where it makes sense,” and added that people, stable environment and stability in policy were the factors that would determine its growth roadmap.

Asked if an opportunity had been lost in the backdrop of the mega Walmart-Flipkart deal unfolding in the business landscape, he said, “Our focus is on cash flow rather than valuation which is where the axis of the world seems to have shifted to. We see the power of e-commerce and some of our products business are in the industrial e-comm space.” The group is expecting some disruptions in the financial services space, where it is already working with a few tech companies. Investments have been made on testing predictive data analytics platforms to ensure robust operations in the long-run, Murugappan said.